In a bid to improve mobile services and to reduce tariff rates, which are among the highest in southern Africa, the Malawi government recently launched an international tender for a fourth mobile phone operator. In fact, they have been trying to increase the number of mobile phone operators to four since May 2008. But is this the best way to improve service and reduce tariff rates?

Malawi

The view that tariff rates are very high in Malawi was also corroborated by the Information Communication Association of Malawi (ICTAM) interim President Derek Lakudzala. Mr Lakudzala points out that the high tariffs, among other things, are due to expensive infrastructure such as towers which is not shared among operators and, therefore, a lot of unnecessary cost is passed on to the consumer. A number of people in my network on Facebook have also mentioned this problem.

Mr Lakudzala further says purely pushing the blame entirely on the operators is not correct either. He says tax policy regimes and regulatory frameworks also play a role. On his part, ZAIN Malawi Managing Director Fayaz King says reduced taxes and wooing more customers to existing network would enable companies to reduce airtime prices.

The duplication of expensive infrastructure can be sorted out easily. Operators should be asked to share space on towers. Government must also consider reducing tax for mobile operators. By the way, how are the tax policy regimes for mobile operators in neighbouring countries?

When I was in Malawi, I used to see a lot competition between Celtel (now ZAIN) and TNM mainly through different kinds of promotion campaigns. One would expect the same competition to force them to reduce tariff rates in order to enlarge their respective subscriber bases. The fact that this is not happening seems to suggest that there are some underlying problems not necessarily to do with lack of competition. The fact that both of them choose to erect their own towers in places where they could have easily shared one tower also shows they are actually trying to outdo each other, albeit at the expense of the wananchi.

The authorities have to find out the kind of profits that these operators are making. If they are making outrageous profits, and do not want the benefits to trickle down to their subscribers, then PROBABLY there is some kind of collusion between the two. But then if they were able to make such clandestine agreements, they would also easily agree to start sharing tower space in order to minimize costs. But never say never.

If the authorities find out that these operators are making abnormal profits, they can ask them to reduce their rates. Otherwise, the introduction of more operators will not help at all as the new operators will just join the existing set-up. Apart from that, they will also erect their own towers and pass the running costs to the subscribers. Therefore, no work done.

If the operators are making losses or marginal profits, then their high tariff rates are to some extent justified. Otherwise, how do we expect them to remain afloat? The introduction of new operators in such an environment will be counter-productive as it will trigger a further rise in tariff rates. Therefore, government has to tread carefully on this issue. My view is that three mobile operators will be great. Four will be an overkill for an economy of the size of Malawi.

MACRA could learn a lesson or two from the Korea Communications Commission (KCC). In 2007, mobile phone bills in South Korea were the most expensive in OECD countries. The Korean government, initially, resorted to promoting increased competition through deregulation in order to lower mobile tariffs. But this resulted in many discounting announcements, while tariff charges became more complex and mobile phone charges actually increased.

Since last year, KCC has adopted a new approach. They are now discussing the reduction of mobile phone charges directly with operators. These discussions are already paying dividends as three operators have reduced their tariffs and related charges.

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